As Panama Canal expands, Latin America rushes to be ready

Standing atop a hulking crane at this country’s largest Pacific port, Alejandro Echeverri pointed out scurrying workers below reinforcing pylons, preparing the ground for an extended pier and tending to a dredging boat that has been deepening the harbor.

As the planning director for the Buenaventura Regional Port Authority, Echeverri says his job is to be a “futurologist” and try to stay ahead of the industry. Right now, the industry’s future is high stakes and under the sway of a singular event: the expansion of the Panama Canal, which will make the ships that straddle the seas larger and heavier than these ports have ever seen.

The industry “doesn’t care what ports need to do to be ready or what it costs,” Echeverri said. “If you’re not ready, they’ll simply take you off their route.”

Ports throughout the Americas and the Caribbean are rushing to be ready for the post-Panamax future. Currently, the Panama Canal can handle ships 965 feet long that need a depth of 39.5, a size known as Panamax. Once the expansion is complete in 2015, the canal will be able to accommodate ships 1,200 feet long with a 50-foot draft — and shippers are already building to those dimensions.

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Ports in Costa Rica, Peru, Jamaica, the Bahamas and Cuba, among others, are either expanding or have plans to expand.

Some, like Buenaventura, hope to receive the “post-Panamax” ships and become a transshipment hub that will supply smaller ports with feeder vessels. Others are simply bracing for increased feeder traffic.

“For the second time, the Panama Canal is going to divide the history of shipping,” said Domingo Chinea, the general manager of the Buenaventura Regional Port Society, who is overseeing the $450 million modernization project. “All the ports along the Pacific are trying to get ready.”

The race for deep water is fierce. Buenaventura currently feeds much of the traffic to the shallower port in Guayaquil, Ecuador. But Buenaventura is facing competition from Balboa, in Panama, which is emerging as the Latin American leader of transshipment and expects to see its business double after the expansion.

The Bahamas is working with Hutchison Port Holdings to stake its claim as the most modern container facility in the English-speaking Caribbean. With a depth of 52 feet, the Freeport Container Port can already accommodate post-Panamax ships.

“We are the best prepared,” said Ian Rolle, president of The Grand Bahama Port Authority. “We have the necessary equipment to handle the traffic and if we need more, we will get it. Having a harbor that is deep enough to accommodate these ships is key.”

But both the port of Jacksonville and Miami are hoping to take a bite out of Bahamian business.

PortMiami is also hoping to undercut Freeport and regain some of the transshipment business that it lost after the terrorist attacks of Sept. 11, 2001, when new security regulations strangled business.

PortMiami Director Bill Johnson said the Panama Canal expansion and Miami’s recent designation as a foreign trade zone, which will make transshipping less cumbersome, will be a threat to Freeport.

“They should be worried,’’ he said. “Our job is to bring this business back. How do we change this? By being bulldog aggressive.”

In many ways, all of the ports in the region need to succeed for any of them to succeed, said German Silva, Colombia’s former vice minister of transportation and a shipping consultant.

If only a few ports in a geographic area can accommodate the massive new vessels, then shipping companies may decide to cover the region with feeder boats, which ultimately increases the costs of goods.

Of 161 ports in South and Central America, only 21 have channels of 50 feet or more, and 13 of those are in Brazil, according to data provided by the American Association of Port Authorities. Colombia, Argentina and Chile also have deeper ports. In Mesoamerica, only Mexico and Panama are in that league. But several ports in the regions have plans to hit that depth.

“If ports don’t get ready, they will simply be left out,” Silva said.

The work at Buenaventura reflects the region’s challenges.

The port is reinforcing its pylons and moorings to keep the larger ships from, literally, dragging the dock into the sea. It’s also receiving two new cranes to unload the taller container ships. The port is already deepening its access canal to 41 feet, but it’s hoping to receive environmental permissions to begin dredging to more than 50 feet to be able to receive post-Panamax vessels.

At the Moin Container Terminal in Costa Rica, APM Terminals is pushing a $992 million project to dredge the canal to 52 feet and have six super-post-Panamax gantry cranes. Puerto Caucedo, in the Dominican Republic, is also in the midst of an expansion project.

Anthony Hylton, Jamaica’s minister of industry, investment and commerce, recently returned from a two-week trip to China and Singapore where he was promoting the government’s plan for the Caribbean nation to become a global transshipment and logistics hub.

The $8 billion to $10 billion project includes dredging Kingston Harbor, expanding port facilities and building a dry dock. It also hinges on linking ports and airports through road and rail networks.

“We have some assets in place. This is not starting from scratch,” said Hylton, who has been trying to woo international investors and expects dredging to begin shortly. “We will be ready for the post-Panamax.”

But the question remains whether Jamaica, which is in the midst of a financial crisis, and other nations, will be able to deliver on their promises, said Anton Edmunds, a Caribbean business consultant.

“People in the region talking about making investments is one thing,” he said. “But actually starting the process — dredging and the process of construction — is going to determine whether they are going to be competitive or not.”

Cuba is another case in point. While the island is renovating its Mariel port, the U.S. embargo is likely to keep it from fulfilling its potential as a transshipment hub, executives said.

Under U.S. law, any ship that calls on a Cuban port is prohibited from entering a U.S. port for 180 days — with limited exceptions covering foodstuffs and humanitarian goods.

“I think Cuba is really one of the most interesting players of the future — of course, assuming the embargo is lifted,’’ said Rodolfo Sabonge, vice president for market analysis and research for the Panama Canal Authority.

The island could become a hub for transshipment of goods as well as near-sourcing of manufactured goods for the U.S. market.

“Maybe it would be like going back to the 1950s,’’ he added.

While Mariel won’t be able to receive post-Panamax ships, deepwater areas near Santiago on the eastern end of the island might be a logical location for a Cuban deepwater port, he said.

What is clear is that the canal expansion, along with the regional building binge, will mean more Latin American countries will benefit from, and depend on, the canal.

Chile is currently the third largest user of the canal after the United States and China, and nearly one-third of its maritime foreign trade is transported through the canal. Some 37 percent of Ecuador’s maritime foreign trade travels via the canal and 32 percent of Peru’s, canal authorities said.

“We’ll see more Latin American countries making use of the canal’’ after the expansion, said Jorge Quijano, chief executive of the Panama Canal Authority.

But the race to become competitive extends well beyond harbors and cranes, said Edmunds, the Caribbean business consultant. Ports need to think about financial services and other infrastructure to attract shippers.

One of Buenaventura’s biggest problems is its roads, said port manager Chinea. In 2007, rains closed the sole roadway into town for more than 40 days. While the government is working to turn the winding mountain road into a four-lane highway — and adding several new tunnels — tractor trailers headed to the harbor are often delayed for hours.

“Colombia’s main challenge in its foreign commerce is to improve its infrastructure — roads and railroads — in the short-term,” he said.

As Echeverri watched workers pour fresh concrete to brace the port for the coming behemoths, he marveled at how fast the industry has changed.

Just five years ago, the largest ships that pulled into Buenaventura carried 1,000 containers. Now, the port regularly receives towering vessels carrying 3,000 containers that can take two days to unload.

Few expected loads to double, much less triple, in five short years, he said.

“The only thing that is certain” about predicting the future of shipping, he said, “is that we’ll probably be wrong.”